IPOs are back, even the bad ones

FORTUNE — The initial public offering on Friday of airline Internet provider Gogo may be a pretty good sign that the IPO market is about to hit some turbulence. Gogo GOGO is not quite Pets.com. But it’s close.

Gogo’s offering is one of those deals that only comes at a time when the IPO market is hot, perhaps too hot. In 2013, 79 companies have gone public, according to IPO specialists Renaissance Capital. While that’s only up 15% from a year ago, IPOs have been gaining momentum lately. Renaissance says June is on track to be the most active month for IPOs in eight years. And while the deals haven’t resulted in the same pop in stock prices that they did in the late 1990s, they’re not doing too badly either. According to Bank of America Merrill Lynch, the shares of companies that have gone public this year are up 24% on average.

Of course, that could all be coming to a screeching halt. The Dow Jones industrial average INDU has slid more than 500 points since Ben Bernanke reiterated that the Federal Reserve is likely to end its bond buying stimulus program later this year. A bad market tends to shut the IPO window quickly. What’s more, Gogo’s stock market performance should give much confidence to other companies deciding to go ahead with their IPO despite the market conditions. As of mid-day Friday, shares of Gogo had fallen $1.50 to $15.53 on their first day of trading.

Still, the fact that Gogo was even coming to market was a sign of the froth in the IPO market.

The company provides Internet access on airplanes, and it’s basically the only one. Gogo has a few small competitors, but mostly if you open up your computer at 30,000 feet, and you are on a plane that offers the Internet, you will have to pony up to Gogo wireless in order to get on. And it has signed a number of long-term contracts locking up American, Delta DAL, and United UAL airlines, as well as others, for years to come. That, along with the fact that more people than ever are addicted to the web these days, is basically the investment pitch.

At least that’s what I think it is. A spokesman from Gogo declined to comment for this article as most companies do right before they go public.

One problem with that investment thesis just got a bit larger. According to the Wall Street Journal, the Federal Aviation Administration will loosen its rules on what types of electronics devices passengers can use on airplanes and when. Right now, the FAA seems focused on takeoff and landing. But the changes could eventually open the door to cellphones and other other wireless devices that could connect with the Internet without customers having to pay for Gogo’s Wi-Fi service.

Gogo’s customers might be more than happy to bolt. The company doesn’t have a great track record of keeping its users happy. Up until recently, the company got an F on the Better Business Bureau site. It has recently been changed to unrated.

Most of the complaints were about unauthorized charges. The company prices its Internet access where it is typically cheaper to buy a monthly pass, around $40, than to pay for access on your trip out and trip back, usually around $22 each way. The problem is a number of customers didn’t seem to realize that when they signed up for the monthly pass, they were really signing up for a membership. Gogo continued to charge their card every month until the people called up and cancelled the service. It’s on their site, but apparently a fair number of people missed it.

Fed up with its pricing scheme, last year a customer sued Gogo wireless, claiming it was a monopoly. A judge ended up throwing out the case on the logic that while Gogo is the sole provider of Internet service on over 80% of all flights that allow web access, it provides no access on 100% of the flights that don’t have Internet access. So, yeah, no monopoly here.

And yet, even with its a lack of competition and un-customer-friendly pricing scheme, Gogo still isn’t making money. In the first three months of the year, the company lost $32 million. And Gogo’s executives aren’t expecting that to change soon. In the company’s IPO documents, Gogo says, “We have incurred operating losses in every quarter since we launched the Gogo service, and we may not be able to generate sufficient revenue in the future to generate operating income.” Sounds promising.

Gogo could argue, as startups often do, that its losses are because it’s still building its business. Gogo has to spend money outfitting planes with its Internet equipment in order to get customers. But even if it stopped spending money, Gogo wouldn’t be making much money. Gogo spent $35 million on capital expenditures in the first quarter. Even without those costs the company still only made $3 million in the first three months of the year. After the IPO, that will translate to $0.04 a share, or $0.16 a share a year in earnings. With an IPO price of $17, Gogo’s shares are starting to trade with a whopping price-to-earnings ratio of 106, about 6 times the average company in the S&P 500 SPX and 10 times Apple AAPL.

And that’s if the company was planning to stop spending, which it’s not. In fact, Gogo expects to shell out another $135 million in capital expenditures this year. That alone will use up four-fifths of the $165 million the company plans to raise in the IPO, which means don’t be surprised in Gogo is back hat-in-hand to investors looking for more cash within the year.

What’s more, the government currently has only dedicated a limited amount of bandwidth to be used for Internet usage on airplanes. Based on current growth, IPO research firm Triton Research estimates Gogo will max out its network by 2016. The service’s speeds are expected to slow before then. Not that it’s so fast now. In most instances, Gogo doesn’t have the capacity to offer streaming video or other services Internet users have grown used to.

It’s also the type of deal investors have come to expect from Wall Street, and that’s too bad.